How big is big business?

33LSS

no, 155

*- '

HOW BIG IS BIG BUSINESS?

CONTENTS p„g,

A Day With Mr. Jones 5

The Big Five H

Number of Business Firms 13

Extent of Concentration 13

Growth of Concentration in World War 11 21

Government-Built Facilities 23

Sale of Government Facilities 25

Mergers 25

Mergers Eat Up Small Business 27

Experience of 1929 28

How Monopoly Operates 30

Monopoly Controls Employment Opportunities 37

Monopoly Reduces Quality 38

Monopoly Prevents Development of New Products 38

Monopoly Promotes Discomfort 39

Monopoly Forestalls Use of Products to Improve Health 39

Other Areas of Monopoly Domination 40

Conclusion *1

CHARTS AND ILLUSTRATIONS page

Trying to Take If All tor HImsoH 6

How Monopoly Affects Mr. Jones' life 8—9

Concentration of Employment, 1939-1944 14

Growth of U. S. Corporations, 1919-1939 14

Income of Manufacturing Concerns 1918-1942 17

"Sharing" the Wealth 18

Control by tight Large Banking Houses 19

How the Monster Grew During World War 11 22

Few Corporations Gain Greater Control 23

63 or 71,000 24

Mergers Since 1940 27

Prices, I929-I933 29

The Tobacco Monopoly 33

How the Bread Monopoly Keeps Prices High 34

PHILIP MURRAY, President

CONGRESS OF INDUSTRIAL ORGANIZATIONS

ALLAN S. HAYWOOD, Vice President JAMES B. CAREY, Sec.-Treas.

Pamphlet No. 158

15c a copy, 10 copies for $1, 100 for $9.50, 500 for $45, 1,000 for $85, 5,000 for $400.

Published by

CIO DEPARTMENT OF EDUCATION AND RESEARCH

718 JACKSON PLACE, N. W., WASHINGTON 6, D. C.

Stanley H. Ruttenberg, Director

Kotherine Pollak Eilicicson, Associate Director of Research

George T. Guernsey, Associate Director of Education
Everett M. Kassalow, Associate Director of Research

I

HovN^ Big

Is Big Business ?

Reprlnlad from fconomlc Outlook, August 1946 and
June 1947, CIO Department of Education and Research
2nd Printing, November 1949

The increase in monopoly control and the increase in the
concentration of economic power places in the hands of a
very limited number of people control over the life and des-
tiny of everyone. This tight grip held by monopoly power
must be broken. This power not only is exercised over employ-
ment and production but has been the main spearhead to
push prices to their present fantastically high levels. This
power in the hands of a limited number of people has swollen
profits to a level which is unhealthy for our entire economy
and which will bring on our next depression.

Prsiident, CIO

October 13, 1947

CI 62r

A Day With Mr. Jones

The average working man engaged in earning a
living for himself and his family has little time to
think about the mysterious problems of interna-
tional finance, economic statistics or patent pools.
His hours are crowded, and his first concerns are
the achievement of better opportunities for himself,
of education for his children and of making his dol-
lars stretch farther and farther, as prices go bounc-
ing beyond his reach. He has heard of monopoly
and perhaps has formed some ideas about the ways
in which monopoly should be treated. In fact, pub-
lic opinion polls have indicated that eighty-five per-
cent of the American people do believe that monop-
olies are bad and that something should be done
about them.

At the same time, Mr. Jones, our average man,
seldom thinks about how monopolies affect him
personally, or his employment, or the things he
buys or what he pays for them. He has a feeling
that monopolies, cartels and combines are far away
from his own affairs. He realizes that monopolies
are large, but in his thinking they are likely to be
vast, nebulous and distant shapes in a remote part
of the other fellow's economic life. It is probably

for this reason more than any other that the real
meaning of monopoly and a full understanding of
such things as cartels and patent pools have not
captured the attention of the ordinary citizen. Once
this understanding becomes concrete in the think-
ing of the American people there is little question
but that they will treat the subject as one of the
two or three major economic issues of their lives.

For it is exactly that. The monopoly problem is
one of the basic and central questions affecting the
welfare and future of the ordinary citizen in the
United States at the present time. In importance
it ranks only below the improvement of industrial
relations and preservation of civil Uberties. It is
tied up with both of them, yet monopoly can be
understood by itself. Its effects are clear-cut. How
important it is for the individual American to have
this understanding can best be illustrated if we
follow Mr. Jones in his daily life and see how often
and in what various and sometimes unknown ways
he meets monopoly and its effects.

From the time that he gets up in the morning
until he goes to bed at night, Mr. Jones or some
member of his fcmiily is face to face with monopoly
in one of its many shapes. Before he eats his break-

fast it is likely that Mr. Jones has brought in the rising costs of production and distribution are to
morning milk. He knows that the price of milk has be blamed. As a recent experience in New York
gone up and he thinks, rightly or wrongly, that City indicated, however, the price of butter, cheese

•.■V^ftVif.j>,'

—.•..•.iv.i-iir/''^'"*-'

.^^«^^.r;^5>^»:3^-^^^^ ^

^

Trying to Take It All in for Himself

and other dciiry products may represent not any
real increase in costs, nor even any reasonable in-
crease in projBts, but may be the result of a delib-
erate conspiracy to hold up the public and make
them pay a dollar a pound for butter and extraor-
dinary prices for cheese and milk. Such cases are
nearly always tied into some form of monopoly con-
trol of the market.

But what about the bottle? It is quite unlikely
that Mr. Jones has given the bottle any thought.
The milkman brings the bottle and when it is empty
he takes it away. If Mr. Jones buys his milk at a
store he knows there is a deposit on the bottle but
that is probably as far as his interest in the subject
has gone. Nevertheless, if his curiosity should lead
him to inquire into the origins of the milk bottle,
Mr. Jones would discover that all the bottles deliv-
ered to him and thirty million other American
families every morning were until very recently
completely controlled products of one of the most
tightly knit monopolies in existence. (See page 37
of this pamphlet.)

After eating his breakfast Jones probably relaxes
a minute before going to work. He lights a ciga-
rette and picks up a newspaper to look at the morn-

ing headlines. The match he strikes and the ciga-
rette he smokes and the newspaper he reads are all
either wholly or in part subject to monopolies which
know his habits much better than he knows theirs.
A match looks like a simple product, yet behind
the history of a single match is one of the most
complicated and involved stories of monopoly in
modem times. The match may cost Mr. Jones
nothing, or so he thihks, but it did cost somebody
something. If he thinks about it long enough he
will realize that, in one way or another, it is always
the man who uses a product who pays for it. If
he multiplies himself by several hundred million,
he will begin to understand why a monopoly in
matches can be Big Business. If he inquires far
enough he will learn, in fact, that the entire match
industry has been under the domination of an in-
ternational monopoly, the match cartel. He may
even recall the shadowy figure of Ivar Kreuger, the
match king, whose suicide in the early 'thirties
brought disaster to hundreds of thousands of peo-
ple, toppled important banks and threatened to dis-
rupt the internal affairs of half a dozen countries.
When it comes to his cigarette Mr. Jones is on
firmer ground. He is well acquainted with the

How Monopoly Affects Mr. Jones' Life

UNOERSTANOINO
ALL THOSE CHARTS
AND FIGURES IS
YOU/t MONOPOLY,
PROFESSOR. IT'S
ALL I CAN DO TO
MAKE A LIVING

A ouiet evening at home—

riLTAKE
MORE THAN

, ^ 'III III...

C/0

Cuerosey-Montguniery (or ECONOMIO OUTLOOK, CIO

variations which occur in the price of a standard
package of cigarettes from one month to another,
and with the raucous but perhaps enjoyable adver-
tising by which he is encouraged to use this or that
particular brand. But if he ever stopped to think
of the reason why all of his favorite brjmds of ciga-
rettes cost him exactly the same, or why, for exam-
ple, he should not be able to get his favorite brand
for one-third of the price he does pay, he will again
find that the answer is monopoly. "But how," he
may ask, "is there a monopoly? They certainly
make many more than one brand of cigarettes."
Here complications set in. For what he will find
if he carries his questions far enough is that he has
been dealing with a form of monopoly by agree-
ment maintained among the big companies of the
American tobacco industry. The American people
smoke billions of cigarettes and cigars in the course
of a year and the tobacco industry is a billion dol-
lar industry. Even though the average smoker
might think that competition was unavoidable, the
Supreme Court of the United States recently con-
cluded, at the end of a long and difficult anti-trust
case, that the tobacco industry was in fact con-
trolled by monopoly power shared among the major

producers who had, among other things, agreed in
effect never to cQlow a good ten-cent package of
cigarettes on the market. (See pages 30 to 37.)
This country, in other words, will never get a good
five-cent cigar or a ten-cent package of cigarettes
as long as monopoly can prevent it.

As for his newspaper, a very brief inquiry would
acquaint Mr. Jones with the fact that the paper
upon which the news is printed and even the ink
are or have been made in industries controlled by
close-knit monopolies. In fact, even some of the
press dispatches which come from distant places
and are preceded by well-known initials of press
associations, have in at least one instance been
foimd to be a monopolized form of news.

Mr. Jones then goes to work. If he is in the elec-
trical industry, the chemical industry, the machine
tool industry, or a plant manuf actiu-ing steel or alu-
minum, or indeed any one of a host of other tyi)es
of manufacturing, there is almost a one hundred
percent probability that the industry is dominated
by a monopoly group. The concern of monopoly
groups is with making higher and higher profits
and only incidentally with maintaining jobs for Mr,
Jones and his millions of fellow workers.

10

When he goes home at night, Mr. Jones may
stay there and Usten to the radio, or he may decide
to go to the movies. If he does go to the movies he
will enjoy one of the most pleasurable types of
monopoly products, but a monoply product none-
theless, for the motion picture industry has been
found to be concentrated under the control of a
few major producers who determine what pictures
shall be made, when they shall be shown, and who
may show them. In years past, major producers
have exercised great control even over neighbor-
hood theatres, and part of the admission price of a
ticket has represented in effect a tax paid to
monopoly.

K he stays at home, Mr. Jones will read his
monopolized newspaper, with the aid of monopo-
lized spectacles, smoking monopolized tobacco, in
the light furnished by a conspicuous monopoly
product, the electric light bulb. It may never occur
to him that light bulbs are a special concern of one
of the largest international monopolies and cartels
in the world, for he thinks of light bulbs as efficient
and economical. Within limits they are, but what
Mr. Jones doesn't know is that because of monopoly
he cannot get better light at lower cost, since

monopoly procedure decided that he should nor-
mally use so many electric bulbs per month or per
year at a certain price and, it may be added, at a
certain level of revenue to utility companies.

If Mr. Jones turns on his radio he is aware of
using a compUcated mechanism which represents a
major achievement of modern man. Yet his radio
set represents a vast field of battle in which indus-
trial giants have fought, combined and fought
again, both among themselves and with govern-
ment. At the present moment the manufacture of
radios is not monopolistic in any simple meaning
of the term. Nevertheless, even the cheapest radio
set is a product of many patent licenses, cross
licenses and agreements floating in a pool of some
fifteen to twenty thousand radio and communica-
tions patents. Again, the history of a modem radio
set is the history of a struggle by and against
monopoly power.

This struggle continues. Television, the wonder
child of radio, is still a dream of the future to the
householder. He will not get television until both
the technical difficulties, which are relatively sim-
ple, and the complex contest among conflicting
monopoly interests are overcome. The same con-

11

dition holds true in nearly all of the much-vaunted
postwar gadgets and improvements intended to
make living more comfortable, housing more plenti-
ful, and to place new marvels of convenience within
the reach of all. Nearly every one of the fields in
which these developments could occur is subject to
control by monopoly groups. New and independ-
ent businesses cannot enter these fields. Until they
can, the consumer will get new products only when,
as, and if, monopoly decides that he should have
them.

Mr. Jones may or may not know that he has had
a busy day with monopoly. If he does know, it
may give him a headache. In this case there is a
simple remedy which monopoly past and present
will place at his disposal. He can take an aspirin
tablet — and then go to bed to dreemi of an economy
of abimdance.

But we must all awake to see what can be done
to break monopoly and sustain full employment at
a fair wage and ftdl production.

The Big Five

When we talk of bigness and economic concentra-
tion, what do we mean?

In America today five large financial institutions
control 31 of the 250 largest manufacturing cor-
porations. These five are the Morgan, Mellon,
Rockefeller, Du Pont, and Cleveland banks.

Some of the more salient points brought out by
studies of monopoly tend to prove:

1. Medium-sized producers can produce as eflB-
ciently and at as low a cost as the very largest cor-
porations.

2. Economic concentration refers to very large
combinations of manufacturing as well as financial
groups.

3. These large financial combinations tend to
dominate not only our economic, but our political
structure as well.

4. Maximum emplojTnent and high income for
the American people could be insured if production
were spread amongst a greater number of produc-
ers and if the larger financial interest groups were
broken up.

If the competitive spirit which is the basis of our
economy is to be kept alive, the small businessman,
who usually operates at high costs, should be helped
to reduce his costs and thus be permitted to com-
pete with the large producers in his industry. This

12

can be done by furnishing tlie small businessman
with loans at low interest rates, and with research
and technical knowledge which now seem to be ex-
clusively in the hands of the large producers.

Number of Business Firms

In 1939 the Department of Commerce reported
that there were 3,300,000 operating business firms
in all industries in the United States. Up through
1941 new businesses of all sizes were coming into
existence. The trend was upward until Pearl Har-
bor. However, between 1941 and 1943 the number
of business firms declined 16 V2 percent. The last
quarter of 1943 indicated a halt in this decline. Dur-
ing the following two years, up through the end of
1945, many new firms were started. However, in
December, 1945, we were still 200,000 firms short
of the high 1941 level.

During the war years a quantity of small busi-
nessmen dropped out of business. They were going
into the armed forces; they could not get sufficient
materials; they could not secure enough rationed
items to remain in retail trade; they could not get
government manufacturing contracts or even sub-
contracts from prime producers. For these and

many other reasons, the number of businesses de-
clined between 1941 and 1943. Although some of
them are now coming back, there exists no evidence
that they have made any dent in the degree of
power of the few financial giants who were put
into the saddle by the war years.

Extent of Concentration

The extent of concentration can be measured in
various ways, such as the amount of employment
provided by large concerns, the size of corporations,
their assets and net income, their ownership and
control, the distribution of stock holdings, etc.
Employment

On the employment side, 99 percent of the manu-
facturing firms employed less than 500 workers
each in 1939. The remaining 1 percent of the memu-
facturing firms, employing more than 500 workers
each, employed nearly half (48 percent) of all fac-
tory workers.

This high degree of concentration was enlarged
during the following five years, and by 1944 the
2 percent of the firms employing more than 500
workers accounted for 62 percent of the total em-
ployees in manufacturing industries.

13

Workers employed in manufacturing

99% of firms employed less tKart 500

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1939^ ^ ^ ^ # #^ ^ bbbbbbbbbb
^ ^ ^ ^ ^i^^ J 1 1 Hbbbbbbbbb

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4o% of worl^ers in 1% of manufacturing firms
wihich employed more than
500 workers each

Workers employed in manufacturing

98% of firms employed less ttion 500

bbbbbbbhbb
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CCONOMIC Ot'TrOOK, CIO

62% of workers in 2% of manufacturing firms
which employed more than
500 workers each

Between 1939 and 1944 manufacturing plants employing more than 500 workers In-
creased their employment from 48% of the total workers In manufacturing to 62%.

14

The very large manufactiiring
firms, that is those employing
more than 10,000, employed 13
percent of the total workers in
1939. By 1944 these giant pro-
ducers employed 31 percent of
the total workers. This is prob-
ably the reason why the Survey
of Current Business in its
March, 1944, issue states, "it is
easy to conclude that the op-
portunities for small business
are narrowing from the observa-
tion that production is becoming
more concentrated within the
large firms of one or more par-
ticular industries." Domestic
Commerce, a Department of
Commerce publication, in Au-
gust, 1946, says that "the share
of small business seems to be
constantly lessening in a number
of industrial lines."

The principle increase in em-
ployment bet^veen 1939 and 1944

took place in war industries. The iron and steel in-
dustry took on 500,000 more workers. Almost all
of these new workers were added in plants that
formerly had employed more than 500 workers.
In other words, in 1939, 57 percent of the employees
in the steel industry were employed by large plemts,
while by 1944 this percentage had increased to 65.

The growth of concentration during the war
years was even greater in the transportation equip-
ment industry, rising from 74 percent in 1939 to 93
cent in 1944. Only 7 percent of the total employees
in the entire industry were in small plants, employ-
ing less than 500 workers.

The Senate Small Business Committee's report on
economic concentration comments that "the part
played by small firms was insignificant. . . . The
record of the war years shows a constant increase
in the importance of big business and a constant
decline in that of the little concerns."

While employment was increasing tremendously
in manufacturing industries during the war, non-
war industries such as food, tobacco, etc., showed
no sharp change. These industries just held their
own.

A somewhat similar growth in the concentration

of employment in the larger manufacturing units
occurred during World War I. This concentration
was only slightly reduced between the two Wcu^.
If this pattern persists, we can anticipate that the
concentration of employment in large concerns will
again be retarded slightly, but will not return to its
prewar level.
Size of Corporations

Ever since the development of our factory sys-
tem, corporations have played a larger role in man-
ufacturing than in any other part of our economy.
Standard Oil, Americcm Sugar Refining, and other
large corporations came into existence before the
end of the 19th century. In 1901 the one billion dol-
lar United States Steel Corporation was founded.
This was and still is the largest single corporation
in the steel industry, and one of the largest in
America.

But the corporation trend continued upward. In
1909 we had only 262,000 corporations. Twenty
years later there were twice as many.

In manufacturing alone, corporations accounted
for 31 percent of the total operating concerns in
1919. They employed about 86 percent of the fac-
tory workers and produced more than three-fourths

15

Growth of U. S. Corporations, 7979-39

pixM Ui^ pi^ pi^ Vi^ pun^

BOOHOMIO OVZLOOIbaO

of the total manufacturing output. Two decades
later, in 1939, corporations accounted for over
half of the number of firms, employed 90 per-
cent of the factory workers, and produced near-
ly 95 percent of the total manufacturing output
In other words, at the beginning of World War
n, small concerns in manufacturing, accounting
for about one-half of the existing number of
plants, actually employed less than 10 percent
of the factory workers and produced only sUght-
ly over 5 percent of the total output.

In his study. The Structure of the American
Econormj, published in 1939, Gardiner Means
indicates that the giant American corporations
have increased their power and influence tre-
mendously in the past thirty years. In 1909 the
200 largest "non-financial" corporations held
only one-third of the assets of all corporations.
This increased to one-half in 1929 and to 55 per-
cent during the late 'thirties.

This upward trend continued through the war
years. In 1942 there were 205 corporations with
assets worth more than $50 million each. They
held one-half of the assets and received nearly

16

85 percent of the total income of American corpora-
tions.

If we look at the income of manufacturing con-
cerns only, we find the trend toward concentration
even more striking. Manufacturing corporations
with net income of more than $4 million accounted
for only 34 percent of the total net income of all
manufacturing concerns in 1918, as against 51 per-
cent in 1942. On the other hand, concerns with an-
nual incomes of less than $250,000 accounted for
24 percent of the total manufacturing income in
1918, as against only 11 percent in 1942.

Ownership and Control

According to the Temporary National Economic
Committee, in 1937, 1 percent of the shareholders
of the 200 largest non-financial corporations of
America accounted for almost two-thirds of the
common stocks outstanding.

Three family groups, the Du Fonts, the Mellons,
and the Rockefellers, had shareholdings valued at
nearly $1,400,000,000. Directly or indirectly, these
three family groups controlled 15 of the 200 largest
manufacturing corporations, owning assets esti-
mated at about 11 percent of the total. Through di-

rect stock ownership, interlocking directorates,
banking facilities, etc., it was comparatively simple
for these families to exert their influence and con-
trol over a large number of American corporations.
The same TNEC report proves that 10,000 per-

Income of Manufacturing Concerns

1918

1942

51%-

ECONOMIC OI'TLOOK, CIO

Small businesses dropped from 24% of the total number of

manufacturers in 1918 to 11% in 1943. Large manufacturing

corporations Increased their total from 34% to 51%.

17

sons, or eight thousandths of one percent of the
American population, own one-fourth of all the
corporation stock in the country. Seventy-five

"Sharing" the Wealth

ECONOMIC OUTLOOK. CIO

According to the temporary National Economic Committee, In 1937, 1% of the shareholders
of the 200 largest non-flnanclal corporations of the U. S. accounted for almost two-thirds

of the common stock outstanding.

thousand individuals own half of all the corporate

stock in the United States.
A glance at the cash dividends paid by corpora-
tions will make it even eeisi-
er to comprehend the ex-
tent of economic concentra-
tion in this country.

Sixty-one thousand peo-
ple, or one-twentieth of one
percent of our population,
receive one-half of all stock
dividends, while 1,000 recip-
ients of dividends receive
10 percent of all payments.
If we take into consider-
ation railroads, public util-
ities and banks in addition
to manufacturing corpora-
tions, we find that the eight
largest banking houses in
America controlled 106 of
the 250 largest non-finan-
cial and banking corpora-
tions in 1935. These eight
interest groups, which in-

18

ECONOMIC OUTLOOK, CIO

Eight large banking houses in the United States controlled 106 of the 250 largest non-flnanclaf and
banking corporations in 1935. These interest groups, whose control tends to set prices and wages,
are Morgan, Kuhn-Loeb, Rockefeller, Mellon, Du Pont, and the banking houses of Chicago, Boston

and Cleveland.

19

elude Morgan (who controls almost 15 percent of
the assets of these 250 corporations), Kuhn-Loeb,
Rockefeller, Mellon, Du Pont, and banking houses
of Boston, Cleveland and Chicago, dominate and
control 29 percent of the combined assets of the 250
corporations. The Morgan financial groups alone
control 41 of the 250 large corporations headed by
United States Steel Corporation, Pullman Company
of America, Phelps-Dodge and Kennecott Copper;
public utilities such as American Tel. & Tel., Con-
solidated Edison; railroads such as New York Cen-
tral R. R., Great Northern & Northern Pacific; and
banks such as Guarcinty Trust and Bankers Trust.

The steel industry offers a clear example of the
economic concentration of productive capacity. On
January 1, 1945, the four largest steel corporations
controlled almost 63 percent of the steel ingot ca-
pacity in America. One of the four. United States
Steel Corporation, alone controlled 35 percent of the
country's ingot capacity. Three financial groups,
Mellon and the Cleveland bcinks, control eight of
the 13 largest steel producers in America and ac-
count for nearly two-thirds of the aggregate ingot
capacity in the United States.

A similar situation exists in the case of copper.

The four largest producers control 86 percent of the
total output. Two of these, Kennecott and Phelps-
Dodge, both controlled by the Morgan financial
groups, produce two-thirds of the copper mined in
the United States.

The eight largest financial interest groups con-
trol directly 106 of the 250 non-financial and bank-
ing corporations. However, it should be pointed out
also that these 106 corporations and their directors
have close ties with other corporations in America.
Their influence extends to medium-sized and small
companies boimd together in the United States
Chamber of Commerce and the National Associa-
tion of Manufacturers. The best example is cited
by the Senate Small Business Committee on what
occurred in January, 1946, during the General Mo-
tors strike and just prior to the big steel strike.
The president of GM held an informal meeting at
the Waldorf-Astoria Hotel. He invited to this
meeeting, the Senate Small Business Committee
points out, "executives or officers of United States
Steel, Bethlehem Steel, American Rolling Mill, Gen-
eral Motors, Westinghouse, Libby-Owens-Ford, and
representatives of the meat packing industry."
This meeting had the effect of determining labor

20

policy and uniting Big Business on the problems of
wages and prices. Thus, in a little meeting in New
York, was determined the wage-price policy to be
followed by not only the big corporations, but in-
evitably by American industry as a whole. When
national policies affecting millions of wage earners
can thus be determined and put into operation by a
handful of individuals, the dangers to our political
and social economy are self evident.

Growth of Concentration in World War II

During the war, the large American corporations
received the greatest percentage of government
contracts. According to the War Production Board,
between June, 1940, and September, 1944, 18,000
corporations received $175 billion worth of con-
tracts from the government, two-thirds of which
went to the top 100 corporations. Thirty-thi'ee cor-
porations each received $1 billion or more of con-
tracts and accounted for 51 percent of the value of
all contracts. The top ten corporations, including
GM, Ford, Curtiss-Wright, Douglas, received 31 per-
cent of the outstanding contracts. GM alone re-
ceived $14 billion worth of contracts, or 8 percent
of the total.

In spite of the alleged efforts to bring small con-
cerns into the war production picture, a consider-
able number which were prepared to be drawn in
never received contracts. Reports of the Small War
Plants Corporation indicate that the small com-
pcinies accounted for only 30 percent of the total
war production. Only about 20 percent of this was
in prime contracts let by the govemmentcd agencies.

Here are some examples of the extent to which
control has gone in American industries:

1. Two hundred fifty corporations control almost
two-thirds of the manufacturing facilities of
this country.

2. These same corporations either own or are
in a position to control memufacturing facili-
ties equivalent to those of all corporations in
America in 1939.

3. All the government-owned manufacturing fa-
cilities or the cissets of 71,000 smaller manu-
facturing firms could be purchased with the
liquid asset holdings of the sixty-three largest
manufacturing corporations.

4. During the war $1 billion was spent on federal
research development. Sixty-eight large cor-
porations received two-thirds of this money.

21

How the Monster Grew

18000 CORPORATIONS HELO GOV'T WAR CONTRACTS.i
too CORPORATIONS HELD 67% i

ys OF GOVT RESEARCH DEVELOPMENT WENT TO"
68 CORPORATIONS

2" THE VALUE OF GOVT WAR PLANTS HAS BEEN
BOUGHT UP BY 6 CORPORATIONS

ECONOMIC OOTUMK, CIO

8.

5. Eighteen thousand American corporations received gov-
ernment contracts during the war but sixty-seven per-
cent of these went to only one hundred corporations.

6. Six large corporations controlled almost ten percent of
the manufacturing facilities in 1939 but by June 30 of
last year they had acquired almost half of the value of
war plants sold by the government.

7. Two hundred of the largest non-financial corporations
own about fify-five percent of the total corporate assets.
One-tenth of one percent of all American corporations
own fifty-two percent of the total corporate assets.
Less than four percent of all manufacturing corporations
earned eighty-four percent of all the net profits of manu-
facturing corporations.

More than fifty-seven percent of the total value of manu-
facturing production is produced under conditions where
the four largest producers in each industry turn out over
one-half of the total output in their industries.
One-half of one percent of all the firms in 1939 employed
five hundred or more workers and accounted for two-
fifths of the total non-agricultural employment in the
country.

12. One-third of the industrial research personnel is employed
by thirteen companies.

13. In 1937, one percent of the shareholders of the two hun-

10,

11

22

dred largest non-financial corpora-
tions accounted for almost two-thirds
of the outstanding common stock.

14. Eight large banking houses controlled
one hundred six of the two hundred
fifty largest non-financial and bank-
ing corporations in 1935.

All of these examples of concentration
in American industry are set forth in brief,
concrete statements to show what a tre-
mendous control is exercised by a limited
number of individuals and a few corpor-
ations. I

Few Corporations Gain Greater Control

Government-Built Facilities

Twenty-five billion dollars worth of new
plant facilities were constructed between
July, 1940, and June, 1945. Of this amount,
$17 billion or $3 out of every $4 worth of
new plant facilities were built by the gov-
ernment. The largest amount ($12 bil-
lion) spent by the government went into
the metal and metal producing industries.

isof

rW^TT ALL CORPORATIONS Xttm

F5^-?3^?JxpK?3'^!r^F^^^r^^^^^^^'^^^5

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>'g#mi[^^

KCONOMIC OITLOOK. CIO

Most of these new government-built facilities
were leased to the large manufactiorers who were
given an option to buy them at the end of the WcU".
K they didn't choose to buy, they had a further
option to rent or lease these plants for peacetime
production.

Eighty-three percent of the government-financed
industrial facilities were operated during the war
by 168 of the 250 largest manufacturing corpora-
tions. One hundred of the largest corporations op-
erated three-fourths of them and nearly one-half
were operated by only 25 corporations.

Our economic structure in years to come will be
determined to a large degree by who gains control
of these facilities. If the large corporations take
up their option to purchase or lease the facilities
they operated during the war, the monopoly posi-
tion of Big Business will thus be enhanced in many
important industries. The small, independent pro-
ducer will be prevented from buying any of the fa-
cilities.

For example, the War Assets Administration
recently placed on sale some $600,000 worth of
machine tools which were located in a plant form-
erly operated by the Glenn L. Martin Aircraft Cor-

poration. However, before any of the independent,
small producers could buy these vital machine tools,
the Glenn L. Martin Aircraft Corporation exercised
its option and bought almost 20 percent of them.
When the independent producers arrived on the
scene to buy the advertised tools, they found that
the best equipment had already been purchased.

There is no question but that the giant corpora-
tions dominated and controlled our manufactiiring
facilities and through them our entire economy,
before and during World War n and they will
probably continue to do so. If we consider the plant
facilities which these corporations owned in 1939,
and add to that the new plants they financed them-
selves, and also the government-built plants they
operated, we get a total plant capacity of about $39
billion or 66 percent of existing plant facilities of all
corporations in 1944 owned or controlled by the 250
large manufacturing corporations. Their total hold-
ings in 1945 would thus be almost equivalent to the
total holdings of all of the 75,000 manufacturing
corporations which were in existence in 1939.

Even more striking is the fact that if the 31
corporations owTied and controlled by the five
powerful families were to acquire the usable gov-

24

emment-owned facilities which they operated dur-
ing the war, they would hold about half as many
facilities as the entire economy had before the war,
or 30 percent of the nation's manufacturing fa-
cilities. That is economic concentration carried
almost to the ultimate.

Sale of Government Facilities

Now let's look at the record of what is actually
happening with the government-built facilities. The
War Assets Administration reports that through
June of 1945, 487 war plants had been sold or
leased. Of these, 111 of the largest type, represent-
ing 62 percent of the sales prices, went to 54 of the
250 large corporations. General Electric bought
or leased 14, Reynolds Metals and General Motors
each 8, Bethlehem Steel 6, International Harves-
ter 5.

For the first five months following V-J Day, 80
percent of the equipment in contractors' plants,
amounting to some $82 million, was sold to the
prime or sub-contractors who used the facilities
during the war. The large Geneva Steel plant in
the Far West, operated by U. S. Steel during the
war, was purchased by them in May, thus eliminat-

ing a good opporttmity to establish competition in
the steel industry on the West Coast. Two-thirds
of all the plants sold so far have gone to companies
which represent only .4 percent of all our country's
manufacturing enterprises.

There is little doubt that the wartime operators
are purchasing all of the government facilities
which are worthwhile. The independent producers
have second and sometimes third choices. Govern-
ment policy gives Big Business every advcintage
to buy, and Big Business is grabbing off the cream
of the crop. The Senate Small Business Committee
describes this economic concentration in the hands
of the giants as "alarming."

Mergers

"Since V-J Day there has been a sharp increase
in corporate mergers and acquisition of small firms
by larger ones, a trend closely resembling the cor-
porate concentration that occurred following World
War I," reported the U. S. Secretary of Commerce
in a press release on June 25, 1946.

The sharpest rise in fifteen years in mergers took
place in the fourth quarter of 1945, and pre-
liminary indications for the first quarter of 1946

25

63 LARGEST
CORPORATIONS

indicate that this trend is continuing. Mergers are
occurring extensively in a number of industries,
most notably in the drug, textile, steel, alcohol
beverage companies, and retail stores.

Only recently in the steel industry, the 8 largest
corporations bought out 35 smaller companies.
Bethlehem, Jones and Laughlin, American Rolling
Mill, and United States Steel each acquired five
to eight smaller companies. Contintental Can Com-
pany absorbed eight pro-
ducers in its field. In the
textile industry, there was
a recent announcement of
one company merging ten
South Carolina cotton mills.
The Safeway grocery stores
bought up three grocery
chains and acquired part in-
terest in another. In addi-
tion, they bought a dessert
company, a biscuit company
and a cheese factory.

In former periods of rela-
tively high production and
high income, the big cor-

porations always attempted to improve their mo-
nopolistic position. "The number of mergers and
acquisitions have served in the past as an extremely
sensitive barometer of trends in corporate concen-
tration," the Department of Commerce reports.

Further emphasizing this point, the Senate Small
Business Committee says, "The trend of mergers
and acquisitions is a symptom in peacetime of the

71,000

SMALLER
CORPORATIONS

£

ECONOMIC OI-nXlOK. CIO

The 63 largest U. S. manufacturing corporations could purchase/ with their liquid
assets, the 71,000 smaller manufacturing firms.

26

growing concentration of economic power. The
fact tliat Big Business now is actively engaged in
buying up small companies strongly suggests that
it will probably follow other courses of action de-
signed to increase its economic power."

Mergers Eat Up Small Business

One of the most serious developments in the
monopoly picture has been the way in which large
corporations have gobbled up smeJler and less im-
portant companies. The Federal Trade Commis-
sion reports that "More mergers and acquisitions in
the manufacturing and mining industries took place
ih 1946 than in any of the previous fifteen years.
In 1946 the number of mergers was twenty-sLx per-
cent above the number in 1945, two hundred
twenty-five percent above the annual average of
the years 1940-41."

The Federal Trade Commission goes on to report
that more than 1,800 independent manufactviring
and mining concerns have been swallowed up
through mergers and acquisition since 1940, with
most of them having been acquired during the last
three years. The total combined assets of the 1,800
independent companies was $4.1 billion or nearly
5 percent of the total asset value of all manufactur-

tCONOMIK OlITLOOK, CIO

ing concerns in 1943. Some three-fourths of the
1,800 mergers were made by corporations having
assets of $5 million.

27

One of the major reforms that must take place in
the control of monopoly is in this area of prevent-
ing large corporations from cutting off small cor-
porations which offer them competition and thus
prevent them from setting prices. (See page 41,
for what to do about this problem.)

Experience of 1929

These extensive developments in the merger field
and the general concentration in American industry
point up the serious character of this monopoly
octopus. Prices of products which workers buy can
easily be set by corporations, without any fear of
change, or without any regard to the welfare of
consumers, so long as large segments of industrial
facilities are controlled as they are by a limited
number of corporations. The greater the concen-
tration in industry, the higher the prices of its prod-
ucts. As long as this concentration continues,
prices will not fall or be reduced, as the experience
of 1929 indicated. During the depression years of
1929-33 prices of products controlled by monopoly
groups were reduced between fifteen and twenty
percent. On the other hand, in manufacturing in-
dustries where the degree of concentration was far

less, prices were reduced thirty to fifty percent.

In farm products where there appears to be little
or no monopoly control, prices came down in the
neighborhood of sixty percent during the depres-
sion years. Grain prices came down sixty percent.
But in the agricultural implement industry where
the largest six producers control eighty percent of
the total production of the industry, prices fell by
fifteen percent during this semie period. Thus, while
farmers received sixty percent less for their grain,
they had to pay prices for agriculture implements
that were only slightly reduced from their 1929
level.

Other comparisons of what happened to prices
tell the same story: In iron and steel, where the top
four control sixty-three percent of the total produc-
tion, prices fell seventeen percent. In cement and
motor vehicles prices also dropped on the average
of seventeen percent. In the tire and tube industry
prices went down twenty-five percent. However, ill
the cotton goods industry, where monopoly in 1929
was nowhere near so extensive as in the basic in-
dustries mentioned above, prices dropped forty-five
percent. And in the leather goods industry they
dropped thirty-three percent.

28

PRICES, 1929-1933:

«92L9 LEVEL

1^33

ECONOMIC OUTLOOK, CIO

Prices of monopoly controlled products fell much less from 1939 to 1933 than those of other
manufactured goods. Farm prices fell much more than those of either group.

29

Since 1933, the worst
year of our big depression,
prices have increased in all
industries regardless of the
extent and degree of mo-
nopoly control. The lesson
that can be drawn from the
price increases since the
base of the 1929 depression
is clear. With increased mo-
nopoly control over many
more industries, we can
anticipate that prices will
not go down very much in
those industries in which
concentration is very high.
The appeal by President
Truman and supporting
groups for industry to vol-
untarily reduce their prices
will fall of its own weight.
Prices which are from forty
to over one hundred per-
cent higher than what they
were in 1933 will not be re-

duced by any significant amount until something is
done about monopoly control. Almost everybody is
in agreement that prices are now too high in many
lines to permit purchases by the mass of American
people. Unless prices come down it is anticipated
that we shall have recession that may develop into
serious proportions. Prices must come down if our
economy is to promote full employment and full
production. But with a monopoly controlled econ-
omy, and if the 1929 experience means anything,
prices will be held at their present level or reduced
only slightly (not enough to mean anything). The
results will be drastic cuts in production with the
consequent effects of unemplojonent, misery and
chaos.

Great concentration in industry will prevent the
kind of price adjustments that are essential if we
are to avoid serious economic collapse. An all-out
attack on monopoly must be made if our national
economy is to operate on an even keel.

How Monopoly Operates

We have been talking in generalities about mo-
nopoly. The basic consideration is how monopoly
can affect the everyday consumer of food, clothing

and other merchandise. Let us look at a couple of
specific examples to see just how monopoly oper-
ates to promote its own interests.

The cigarette industry illostrates this well. For

a time during the depression — 1931, 1932 and 1933
— ten-cent packages of cigarettes began to make
an inroad into the market. The Big Three top
companies — American Tobacco, R. J. Reynolds emd
Liggett and Myers, which control well over ninety
percent of the production — decided that the makers
of ten-cent cigarettes should be driven out of busi-
ness.

The Big Three were selling their cigarettes at
fifteen cents a package and were getting along very
well. But, according to a United States Supreme
Court decision, they "conspired to fix prices and
to exclude undesired competition . . ." This con-
spiracy consisted of first cutting the market price
of their own cigarettes, thus placing their brands
in competition with the ten-cent cigarettes. This
proved too costly a procedure, so the Big Three de-
cided to use other means. The second procedure
was an effort to manipulate the prices of the raw
tobacco going into the production of cigarettes.

Before 1931 the total sales of ten-cent cigarettes

30

did not amount to very much. But in 1931 the Big
Three raised their price by forty-five cents a thou-
sand. This increase made the price difference be-
tween the popular brands and the ten-cent ciga-
rettes sufficient to greatly affect sales. Thus, be-
tween June 1931 and November 1932 ten-cent
cigarettes increased their total production thirty
times. They had less than one-half of one percent
of the total cigarette market in June 1931 and in
November 1932 they had almost twenty-three per-
cent of the market. This thirty-fold increase
caused the Big Three to put their heads together
£ind conspire to "fix prices and exclude undesired
competition."

In January 1933 the Big Three cut their price by
eighty-five cents a thousand. In February they cut
another fifty cents a thousand. Thus, the price
was reduced to within the range of competition
with the ten-cent cigarette. The evidence, accord-
ing to the U. S. Supreme Court, seems to show that
this cut in price was directed at driving the msmu-
facturers of the ten-cent cigarettes out of business.

During the first few months of 1933 when the
Big Three reduced their prices by $1.35 a thousand,
the sale of ten-cent cigarettes began to fall off. The

Big Three distributed posters and carried on exten-
sive advertising to show that their cigarettes were
also ten cents a package. The public would sooner
buy the popular brands if the prices were within the
range of the cheaper cigarettes, so when the Big
Three cut their price, their sales increased.

The ten-cent cigarettes which held about twenty-
three percent of the market in late 1932 had less
than six and one-half percent of the market by the
middle of 1933. This price war naturally cut into
the profits of the Big Three. Although they did
not like the idea of losing all this money, they
wanted to make sure the manufactui'ers of ten-cent
cigarettes were driven out of the market. They
therefore conspired to work out for themselves a
less drastic method of controlling the ten-cent cig-
arette competition.

This proved so successful the Big Three were
able to raise their price, between 1933 and 1940,
back to where it was before the price war started.
They were able to do this because they had worked
out a way to manipulate the price of hurley and
flue-cured tobacco which is used in the manufac-
ture of cigarettes.

In 1934 an official of the American Tobacco Co.

31

estimated that if the price of raw tobacco exceeded
twelve or twelve cind one-half cents a pound the
manufacturers of ten-cent cigarettes would be
tightly squeezed. It was therefore very simple to
conspire to raise the price of cheap grades of to-
bacco used in ten-cent cigarettes to a point above
twelve and one-half cents.

The government, in its brief filed against the
monopoly, stated that the Big Three "through
manipulating the grades and prices of leaf tobacco
had attempted to increeise the price of these to-
baccos normally available to the manufacturers of
ten-cent cigarettes." It was becoming difficult for
the manufacturers of ten-cent cigarettes to obtain
an adequate supply of leaf tobacco at a profitable
margin.

There are many grades of tobacco which go into
the production of cigarettes. The lower grades are
used for ten-cent cigarettes while the better grades
are used for the more popular fifteen-cent brands.
Through conspiracy, the Big Three increased the
price and lowered the quality of cheaper grades of
tobacco to a point where the manufacture of ten-
cent cigarettes was unprofitable. For example, in
1931 the R. J. Reynolds Co. bought less than three

million pounds of a cheap grade of tobacco at 10.7
cents a pound. During the years which followed
they increased their purchase of this low-grade
to almost five million pounds. In 1936 they paid
twenty-five cents a pound. By 1938 they were
buying over ten million pounds of the cheap grade
at eighteen cents a pound, some six to six and one-
half cents out of the estimated range the ten-cent
cigarette manufacturers could afford to pay.

The American Tobacco Company manipulated
the price of one of the tobaccos which it bought,
from a little over eight cents a pound in 1932 to
fourteen cents in 1935. There is much other evi-
dence to show how the Big Three manipulated to
prevent the American consumer from being able to
buy a good ten-cent package of cigarettes.

The decision of the Supreme Court was ren-
dered in June 1946, over a year ago, but yet little
or no effective action has been taken against the
Big Three to prevent them from continuing to con-
spire to eliminate competition. Every cigarette
smoker who pays fifteen cents or more for the
popular brands should realize that he could get an
equally good cigarette for ten cents were it not for
the monopoly control maintained by the Big Three.

32

Paying four or five cents a package more than he
should, a smoker who smokes a pack a day, during
the course of a year, contributes an excess of be-

tween $15 and $20 to the coffers of the Big Three.
The average American consumer could use this
amount to better advantage.

KCONOMIC Ol'TU>OK, CIO

By bidding up the prica of tobacco, the "Big Three" cigarette
companies [^5<t a pack) drove the smaller firms (10^ a pack)

out of business. This cost the average consumer of cigarettes
approximately $20 a year.

33

Monopoly operates in other fields just as it does
in cigarettes. In one way or another it manipu-
lates the market so as to force higher prices on the
consumer. In the last analysis, this is accomplished
by eliminating competition which spells lower
prices. All types of tactics are adopted to destroy
competition from independent small businessmen.

Another very good example of how monopolies
operate to increase living costs of American families
is the bread industry. Here is a staple food, the
staff of life. Eighty-five percent of American bread
is produced by commercial bakeries. Because bread
is perishable, concentration exists in local market
areas within a radius of one hundred miles. In
these local markets, particularly in large cities, the
commercial bakers have gained a strong foothold.

The Federal Trade Commission has just prepared
a report on the wholesale baking industry. This
report is an extensive analysis of how the large
commercial bakers operate to squeeze out competi-
tion from the small local bakers, and thus are able
to control the bread market by themselves and set
their own prices with no relation to competition or
quality (food value) .

There are four main practices followed by com-

mercial bakers to eliminate competition. They
usually sell their bread to loccJ stores on consign-
ment, that is, with an agreement to take back what-
ever bread is not sold; or they offer the retail
store free racks to display bread and cake prod-
ucts; or they give special premiums or discounts
if their products £U"e sold at a set time; or, most
important, they carry on price Wcirs.

In these price wars the big operators cut their
selling prices below cost for a period of time long
enough to eliminate the local small baker. When
the little bakers are eliminated, the big bakers im-
mediately reset their own prices.

The big commercial bakers first attempt to enter
into an agreement with local bakers to maintain
high prices, but where this fails price wars result.
The commercial baker is able to reduce his prices
temporarily to a point below cost because while
he may be losing money in Chicago, he will be
making money in Kansas City or Detroit. He
is thus able to write off Chicago losses agednst
Kansas City profits.

In Chicago, for example, commercial bakers were
selling a twenty-ounce loaf of bread at eight and
one-half cents wholesale. This same loaf is retailed

34

by these bakers at between eight and nine and
one-half cents in the nearby suburbs of Chicago,
The Federal Trade Commission says "The effect of
these various prices and weights may be substan-
tial to lessen competition in the line of commerce in
which these bakers are engaged and to injure, de-
stroy and prevent competition between such baking
companies cuid their competitors in the sale and
distribution of bread. . . ."

Details of how this operates can be seen by ex-
amining a bread route of a large commercial baker
in Chicago. This baker distributes bread by truck
to a sub-depot one hundred miles away in Kanka-
kee, Illinois. The bread is then distributed by truck
to a series of towns near Kankcikee. In the first
four towns this bread is sold for nine cents. In the
next two towns of Brook and Foresman, Indiana,
this bread is sold for eight cents. Further along
on this Scime route, in the town of Goodland, In-
diana, this bread is sold for nine cents, again. Still
further along this identical route, in the towns of
Remington, Wolcott, and Sccifield, the bread is sold
for eight cents; and five miles beyond Seafield,
bread is sold for nine cents in another series of four
towns. Now why is it that the people in Brook,

Indiana, pay eight cents while the people in Kanka-
kee, just a few miles away on one side, and the
people in Goodland, a few miles away on the other
side, must pay nine cents?

In early 1941 the large Chicago baker increased
his price from eight cents to nine cents, hoping that
he could continue to charge the higher price. How-
ever, the local baker in Brook, Indiana, continued to
sell his bread at eight cents. The result was that
the local baker's sales volume greatly increased.
After a period of six weeks the Chicago baker re-
duced his price to eight cents. Local competition in
this instance forced the Chicago baker to reduce his
price while in the towns to the east and west of
Brook, were there was no competition, the price
remained at nine cents.

In the next spot along this truck route where the
Chicago baker was forced to sell his bread at eight
cents, i.e.. Remington, Indiana, another interesting
development occurred. Remington was served by
locally owned and operated bakeries in near-by
towns. However, the Federal Trade Commission
points out that "all of these bakeries were elinii-
nated from the town of Remington because of the
eight-cent price of the twenty-ounce loaf quoted by

35

How fhe Bread Monopoly Keeps Prices High

TOWN**!

TOWN "2

TOWN

TOWN

TOWN "6

TOWN *8

TOWN'

■JXONO.MIC OlTl.OUK, CIU

the Chicago bakery operating its route out of
Kankakee." The FTC goes on to say: "It is im-
portant to understand how the Chicago bakery
can ship bread to its Kankakee depot and deliver
by local truck to a point over one hundred miles
distant from Chicago and sell it at a price one-
half cent below the Chicago price for the same
size and quality loaf." The large Chicago baker
can do this because at some other point he is
making sufficient profit to offset temporary loss
incurred at Remington while attempting to
force local bakers out of the business.

Another good example of how commercial
bakers force small bakers out of business can
be seen by examining the situation in four little
towns near Elgin, Illinois. These four towns
were being serviced with a sixteen-ounce loaf
of bread selling for eight cents. A large Chica-
go baker substituted a twenty-ounce loaf for
eight cents and "as a result, the Elgin baker was
practically eliminated from these markets as he
was unable to sell his sixteen-ounce loaf at eight
cents in competition with the twenty-ounce loaf
of his competitor at the same price."

It is therefore clear that in Chicago, as well

36

as in many other areas through the United States,
bread is sold at varying prices by commercial
bakers without any relation to costs, profits or the
actual distance from the bakery. It is sold in com-
petition with locally produced bread, according to
the FTC "to the detriment of the small bakeries."
Local bakers are forced out of business, local peo-
ple lose their jobs, local consumers pay a high
price for bread just because the monopoly interests
of the commercial baker dictate a desire for large
profits.

We have referred in detail to specific examples
of how monopoly operates. First, in cigarettes,
through the price manipulation of raw tobacco the
big manufacturers forced the small producers out
of business, thereby depriving the consumer of ten-
cent cigarettes. In the case of bread, we have seen
how price wars in the long nm force the consumer
to pay more for the one food which is on the table
of every family in America. Just as monopoly
operates in the field of cigarettes and bread, so it
operates in most other industries in this country.

The main pattern in monopoly is to eliminate
competition so that the monopoly can control the
market and set its own price — a price which is

usually much higher than would result if competi-
tion prevailed.

Monopoly Controls Employment
Opportunities

However, price is not the only effect of monopoly,
which frequently operates to control employ-
ment by preventing new enterprise and new busi-
ness from starting, thus depriving many work-
ers of an opportimity to earn a livelihood.

A good example of this is the recent anti-trust
case against the Hartford Empire Company. This
company controls all of the 1500 patents for the
production of glassware machinery. This machin-
ery produces milk bottles, medicine and toilet bot-
tles, liquor and beer bottles, jars and bottles to pack
fruit, cind other glassware. The Hartford Empire
Company does not produce machinery or bottles.
It controls only the patents. With the control of
these patents the company can decide who will be
permitted to secure machinery and produce glass-
ware. The brief of the government before the
courts in this case stated that the Hartford Empire
decides "what firms shall come into the industry

37

and what firms shall stay out; what product each
concern may produce and in what volume." This
company was thereby able, through its controls, to
prevent new producers from entering this field and
thus to deprive many people of the opportunity to
work. This company was also able to tell the
users of the machinery how many of each type of
bottle they were to produce, and this also limits
employment opportunities. But still further, this
company, by controlling the amount of bottle pro-
duction, can control the price of the bottle. More-
over, by limiting the number of milk bottles, which
forces up their price, the price of milk is corre-
spondingly increased.

Monopoly Reduces Quality

Take flash light bulbs. There was a time when
they were produced to outlast three flash light
batteries. Electrical companies, however, carried
on research to reduce the life of the bulbs. This
can be described as how to go forward by going
backward.

A memorandum from one of the major Amer-
ican electrical companies stated "We have been
continuing our studies and efforts to bring about

the use of one-battery lamps. ... If this were done
we estimate that it would result in increasing our
flash light business approximately sixty percent.
We see no logical reason . . . why such a change
should not be made at this time. ... I urge that
every assistance be given them (the electrical
companies) to put it over." Thus the electric com-
panies have been conspiring to reduce the life of a
flash light bulb from that of three batteries to that
of one battery.

Monopoly Prevents Development of
New Products

There are many examples of how monopolies
have operated to limit new products. One of the
best and one that hits home most is the interna-
tional cartel agreement between the Standcuxl Oil
Company of New Jersey and the German firm of
I. G. Farben in 1929. A Standard Oil official said,
"The I. G. Farben are going to stay out of the oil
business proper and we are going to stay out of
the chemical business insofar as that has no bear-
ing on the oil business."

This agreement had tremendous effect upon the
ability of the American government to carry on its

38

war efforts after Pearl Harbor. Standard Oil, by
entering into this agreement, kept the Americcin
people from developing synthetic rubber, which is
a chemical product. Standard Oil not only agreed
with I. G. Farben not to enter into the production
of synthetic rubber, but cooperated with I. G.
Farben in preventing anyone else in America from
producing this product. The synthetic rubber pro-
gram was therefore set back a considerable num-
ber of years purely because an American com-
pemy entered into an international cartel and mo-
nopoly agreement wdth the world's largest pre-
war cartel, I. G. Farben.

Monopoly Promotes Discomfort

The Association of American Railroads conspired
to prevent and delay installation of air condition-
ing equipment in coaches of railroad passenger
trains throughout this country.

A Nebraska court, in handing down a decision,
said, "Agreements restricting the installation of air
conditioning were entered into . . . and were en-
forced. ... It was realized from the outset that
the use of air conditioning could not be completely

prevented in the face of insistent public demand."
Efforts were therefore concentrated on "delaying,
minimizing the installation of air conditioning. . . .
Individual installation programs were accordingly
suppressed and delayed. ..." In this way, the
American railroads not only prevented railroad
passengers from traveling in comfort but also de-
prived air conditioning equipment workers of em-
ployment.

Thousands of G.I.'s and other railroad passengers
who traveled on troop trains ask themselves why
they had to travel in stuffy, filthy railroad cars.
But little did they realize that the reason for their
discomfort rests on the doorstep of monopoly con-
trol of the installation of air conditioning equip-
ment, exercised by the American Association of
Railroads.

Monopoly Forestalls Use of Products to

Improve Health

Vitamin D is essential for proper bone growth
and development, for the prevention and cure of
rickets, for the prevention and reduction of tooth
decay. It is possible for various foodstuffs, such

39

as milk, bread and flour to be fortified with Vita-
min D. But the company that controlled the pat-
ents carefully determined what products should
include Vitamin D and the amount to be included.
The Justice Department found that the company
controlling Vitamin D, ". . . created a domestic
monopoly resulting in division of fields, price fixing,
control of container size, and limitation of potency
of vitamin products. As a result, the public has
been charged excessive and arbitrarily high prices."
The company controlling Vitamin D has been de-
scribed as being "merciless in beating out compe-
tition." They have used various methods to pre-
vent Vitamin D from being extensively used by the
American people. They have suppressed the use
of competing processes. They have denatured and
adulterated Vitamin D preparations in order to
maintain high prices. They have blacklisted com-
panies who violated the established price. They
have entered into international agreements with
I. G. Farben, to eliminate world competition. They
have shown lack of interest in new research, not
only by themselves but by other groups; they have
carried on only such research as would result in a
commercial profit to them.

Other Areas of Monopoly Domination

There are many other examples of how monop-
olies operate to affect the everyday life of the
American worker and consiomer. Here are some
that fit into the pattern of monopolistic practices
discussed above.

Fluorescent Lights

For many years fluorescent lighting was held
off the market. Twenty watts of fluorescent light-
ing give off far more light than twenty watts from
an ordinary bulb. Fluorescent lighting reduces
consumers' electric bills and therefore affects the
profit of electric utilities companies.

Everlasting Match

The international match cartel obtained patents
for the "everlasting match" and prevented it from
being placed on the market. Although this match
was commercially successful in Holland and Swit-
zerland, it was never manufactured commercially
by any American producer. The American mem-
ber of the international cartel, the Diaimond Match
Company, stated, "It is to be hoped that if the
item is not put out and pushed by a strong manu-
facturer, no one else will take it up. . . ."

40

Automobile Batteries

A lifetime battery for automobiles is a real pos-
sibility, but its introduction into this country has
been retarded by cartel agreements.

Cheese

Pre-war distribution of over one-half the nation's
output of cheese was controlled almost wholly by
four distributors. In Wisconsin, 50,000 farms pro-
duce milk for cheese-making. This is almost one-
third of the total number of dairy farms in the
state. Sixteen hundred factories produce cheese
with milk purchased from the 50,000 farms. Most
of the cheese factories are small and their prod-
ucts, instead of being cured and distributed by
themselves, go into the hands of a few large cor-
porations who, according to an official of the De-
partment of Justice, "store, market and sell the
cheese at prices of their own making." Here again,
the consumer is forced to pay dear for monopoly
control.

Railroads

The federal government, in a suit brought before
the Justice Department over a year ago, charged
the western railroads with conspiring to fix rates

and control competing forms of transportation.
These practices result in higher prices for con-
sumers. The net effect of this discriminatory rate-
fixing has been to hold back the development of
whole geographical areeis.

A case brought a year ago by the southern states
against the railroads attempted to stop discrimina-
tion against transportation in and out of the South.
Railroads, in spite of the Interstate Commerce
Commission which reviews less than one percent of
the railroad rates, have conspired with large mein-
ufacturers in the North and Northeeist to prevent
southern industries from developing. This action
also deprives of employment many thousjinds of
people in the South.

Conclusion

We have mentioned many examples of how mo-
nopoly operates. In most instances, the Depart-
ment of Justice has taken some action against the
corporation concerned. But this action frequently
falls far short of the necessary remedies which
must be effected if monopoUes are to be broken.
A real attack upon monopoly control must be part
of an over-all approach to the basic issue of full

41

employment. All types of conspiracy by monopo-
lies, in one way or another, place a hidden tcix upon
consumers. If full employment is to be attained in
America, we must have maximum purchasing
power, uninhibited by this tax.

Pending the development of an over-all inclusive
full employment plan, certain essential steps can
be taken to curb monopoly:

1. The government agencies working in this field
— such as the Interstate Commerce Commission,
Federal Trade Commission, and Department of
Justice — should coordinate their work.

2. Their appropriations should be sufficient to
carry on effective work. The Department of Justice
has never had more than $2.5 million in any one
year. This is less than what one corporation paid
to fight one suit pending against it. Congress
should see to it that the administration of the laws
now on the statute books of the United States are
not crippled by the fciilure of adequate appropria-
tions.

3. Government aid should be made available to
small business to the extent, possibly, in some cases,
of subsidizing marginal producers.

4. In other cases, loans to small business should

be made available. Private banking houses control
monopoly corporations and are therefore reluctant
to lend money to small competing businesses. Gov-
ernment loans are therefore essential.

5. There should be a system of universcJ use and
control of patent rights.

6. Government reseeirch should be carried on
extensively in all industrial fields, with the assur-
ance of unrestricted use in American industry of
government patents resulting from such work.

7. Pilot plants might be set up in certain indus-
tries to force prices down to reasonable levels; that
is, more extensive use of the experience gciined
through TVA.

8. Congress should give the Federal Trade Com-
mission the right to stop mergers resulting from
large corporations requiring the assets of small
companies.

9. American corporations should be banned from
entering into international cartel agreements, such
as those entered into with I. G. Farben and others
before the war.

10. In the light of present economic tendencies,
it may become necessary to give serious considera-
tion to public control, either through regulation or

42

ownership, as a means of curbing monopoly prac-
tices.

11. It may be also necessary, in order to stop
monopoly, to subject the major privately owned
corporations to some type of government regula-
tion.

12. The President should be authorized and di-
rected to conduct an annual investigation into the
extent of monopoly and monopolistic practices and
further be directed to include in his Annual Eco-
nomic Report to the Nation specific legislative rec-
ommendations to cope with the unfavorable prac-
tices incurred.

Monopoly control of industry in the crucial areas
of our economy, as discussed in this pamphlet, spells
doom, unless such basic steps are taken. In order
to attain fuU employment and full production, it is
essential that capacity and output of certain basic
industries be increased.

"Full Employment Pattern, 1950," published by

the U. S. Department of Labor, shows, for example,
that we need ten to fifteen million more tons of
steel, three to three and one-half million more
trucks and passenger cars, one hundred to one hun-
dred thirty million more barrels of cement, etc., in
order to attain full employment and full produc-
tion. Under monopoly control of industry we are
not likely to get this expanded capacity, because
their thinking is not in full employment terms.
Monopoly accepts depressions as inevitable, along
with a boom and bust psychology. Monopolies not
only refuse to expand their own capacity because
during a depression period they would be left with
excessive productive facilities but, because of their
dominant position in their particular industry, they
prevent new enterprise from bringing in additional
capacity.

The grip which monopoly holds upon our econ-
omy must be broken before we can have an econ-
omy of abundance with full employment at a fair
wage and full production.

43

Can You Answer These Questions?

1. Name at least six items with which you come
in contact each day that are controlled by
monopolies. (Pages 5-12)

2. How many corporations do the five largest
financial institutions in America control? Name
the five financial institutions. (Page 12)

3. Trace the growth of U. S. corporations between
1919 and 1939 in terms of the number of
operating concerns, factory workers, and manu-
facturing output. (Pages 15-16)

4. According to the Temporary National Eco-
nomic Committee, what percentage of the
shareholders of the 200 largest non-financial
corporations in America account for almost
two-thirds of the common stock outstanding?
(Page 17)

5. How many non-financial and banking corpora-
tions are controlled by the eight largest bank-
ing houses? Name these eight banking houses.
(Pages 19, 20)

6. How many corporations control 52 percent of
total assets of U. S. corporations? (Pages
22, 23)

7. To whom has the War Assets Administration
sold wartime government-built plants and
equipment? (Pages 24, 25)

8. Why are business mergers dangerous? (Pages
25, 26)

9. In the depression period of 1929-33, did the
prices of monopoly-controlled products fall as
fast as prices of products which were not mo-
nopoly-controlled? Why? (Page 29)

10. How did the big tobacco companies conspire
to eliminate competition? (Pages 31-33)

11. How do the large bakeries drive out competi-
tion? (Pages 34r-37)

12. Besides eliminating competition, how are mo-
nopolies harmful to our American economy?
(Pages 37-40)

13. Give a few examples of the operation of mo-
nopolies. (Pages 40, 41)

14. What can be done to eliminate the influence
of monopolies upon our American economy?
(Pages 42, 43)

44

ECONOMIC OUTLOOK

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"The BLS Family Budget Study," March
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"Improve Educational Opportimity thru
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Facts on current expenditures on education
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A call for vigorous action to halt the down-

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A summary of the study, A Natioyial Eco-
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"Big Business Grows Bigger," October 1949
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showing that monop)oly interests are expand-
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